Esquire Lifts Profit as Litigation Lending Expands
Net interest income climbed 22.2% to $35.7 million as earning assets grew.
Esquire Financial Holdings (ESQ), the litigation-focused commercial bank, reported a 9.2% increase in second-quarter net income to $13.0 million as loan growth lifted interest income.
The quarter extended Esquire’s balance-sheet expansion while narrower lending yields, higher expenses and merger costs weighed on some profitability measures. Average interest-earning assets grew 23.5% to $2.40 billion, while net interest margin slipped to 5.96% from 6.03% a year earlier.
Diluted earnings rose to $1.49 a share from $1.38 a year earlier and $1.40 in the first quarter. Excluding $970,000 of after-tax expenses tied to the Signature Bank acquisition, adjusted net income increased 15.9% to $14.0 million and adjusted earnings reached $1.60 a share. Revenue for the first six months rose 18.7% to $82.6 million.
Average loans increased 28.3% to $1.88 billion, helping lift loan interest income 26.6% even as the average loan yield declined. Loans ended the quarter at $1.90 billion after growing at a 19% annualized pace from March, despite $76.1 million of payoffs.
Litigation-related loans grew 41.0% and accounted for 68.1% of the portfolio, up from 61.5% a year earlier. Deposits rose 22.3% to $2.18 billion, led by a 38.3% increase in litigation-related escrow and IOLTA balances, though the cost of deposits increased 5 basis points to 1.03%.
Payment-processing volume rose 4.3% to $10.6 billion, while related fee income was nearly unchanged at $5.1 million as merchant mix and risk profile limited revenue growth. Noninterest expense increased 23.7% to $21.1 million, including $1.1 million of Signature merger costs, and the reported efficiency ratio weakened to 50.1% from 47.6%.
Nonperforming loans declined to $5.1 million, or 0.27% of loans, though Esquire placed a new $4.4 million multifamily loan on nonaccrual after a $1.6 million charge-off. The company has received all required regulatory approvals or waivers for the Signature acquisition, which is scheduled to close Aug. 1.